China’s Belt and Road in Balkan coal dead end & why the EU should care

Author: Igor Kalaba, Energy Policy Coordinator for South East Europe, CAN Europe

Governments in the Western Balkans have developed a liking for taking out Chinese loans to buy new Chinese coal plants in order to burn Balkan coal. These loans are presented to the public as investments although both China and Balkan governments know that ever stricter EU regulation on pollution means these plants will not operate their projected life cycles nor yield projected financial returns to justify them.

Short-term interests of Balkan politicians, Chinese technology vendors and construction firms, will lock the people of Western Balkans into a health, economic and environmental dead-end. Both China and Europe must take the current opportunity to save their initiatives, namely the Belt and Road and Credible Enlargement Perspective for the Western Balkans respectively, from falling into any new Balkan coal pits.

Balkan governments still hot for coal

Countries in Southeast Europe are addicted to coal for electricity production. Most plants are old, built in the 1960s, 70s and 80s. They are extremely polluting. The region is home to seven of the ten most polluting coal-fired power stations in Europe! Public health costs from air pollution from coal-fired power plants in the Western Balkans are estimated at EUR 8.5 bn annually.

Coal plants mean centralized energy and centralized money. The plants are, for the biggest part, state-owned and financially unsustainable due to frequent breakdowns, overemployment with fake jobs paid out to buy votes and riddled with corruption issues, such as harmful mining deals, questionable concession policies, etc.

Western Balkan governments plan to add about 6 GW of new coal power capacity by 2030, largely financed by Chinese loans, except for the “Kosova e Re” plant where the World Bank is now reconsidering its initially pledged support.

The demands of continuous campaigning in splintered political environments of the Western Balkans coupled with uncompetitive, almost stagnant economies mean meaningful photo-opportunities illustrating real improvements to living standards are few and far in-between. Hence, politicians do not refrain from announcing new coal investments valued in hundreds of millions of Euros with a complete disregard for financial and environmental reality or, indeed, their own national plans and strategies.

When it comes to clean air, environment and climate change policy, one could call 2017 and 2018 eventful. First, the EU officials adopted new technical standards for large combustions plants, also known as LCP BREF (Best Available Techniques Reference Documents), which set out the best available techniques for pollution control and emissions limits. At the moment, most of the planned new coal-fired thermal power plants (TPPs) are set to break this rule, and the only recent addition to the region’s fleet, namely the TPP Stanari in Bosnia and Herzegovina, is already in breach of these EU standards, making it obsolete after less than two years of operation.

Next, the EU’s Energy Efficiency Directive (EED) and Renewable Energy Directive (RED) were updated bringing even higher renewables and energy efficiency targets for member states, thereby steering the block towards the path more compatible with the goals of the Paris Accord.

Finally, Europe’s Emissions Trading System (EU ETS) has been finding its legs again and the price of CO2 European emission allowances increased from just over EUR 5.20 two years ago to current EUR 15.55. Virtually none of the planned new TPPs in the Balkans has a CO2 price included in their feasibility analysis. Either their planners do not expect these new coal plants to emit a single tone of carbon into the atmosphere or they do not expect the EU’s emissions rules to apply in the Western Balkans?

The countries of the Western Balkans must turn away from coal and towards renewables and energy efficiency. Luckily, this can be compatible with both the regions hopes for eventual EU membership and China’s development finance and cooperation.

The region offers a huge untapped potential for developing renewable energy and energy efficiency projects. In fact, the energy efficiency potential is the largest in Europe. China is well placed to help. Much like the increasing number of EU member states, it is closing coal at home, with a staggering announcement of 50,000 MW of scratched coal power in 2017 and global leadership in promoting the growth of solar power, for example, so abundantly available in the Western Balkans, but largely untapped.

One cannot but wonder then, how has China ended up financing the resuscitation of coal in the Western Balkans, that most polluting of fossil fuels. China’s heart is clearly not set on coal. Rather, it sought large and feasible infrastructure projects. With the exception of some obvious transport projects, for the Western Balkan governments this has meant new coal, most of which are actually quite old, conceived and inherited from the Yugoslav era of planning, so incompatible with 21st century imperatives of financial and environmental sustainability.

This article has been composed in the same week of two important events for the Western Balkans and its current energy transition crossroads: On one hand, the so called “16+1” Summit was drawing to a close in Sofia, Bulgaria, where the prime ministers of China and Central and Eastern European countries, Western Balkans included, focused on whether and how the platform addresses the issues of economic underperformance and strained relations with the EU.

On the other, the United Kingdom is hosting the Western Balkans Summit in London, the fifth such gathering convened under the so-called Berlin Process, which brings together each year the so called Western Balkan six (WB6), like-minded EU partners and representatives of the EU institutions to work together for security, stability, and prosperity in the region.

Between them, China and the EU have a unique opportunity to tell the Balkan leaders in no uncertain terms that their initiatives will not fall into the pitfalls of so-called “new” Balkans coal.

For the Western Balkans, the opportunity to embark upon a full-hearted energy transition away from its depreciated communist-era coal fleet towards energy efficiency and renewable energy systems is such that it carries an unprecedented promise of better health, more jobs, and prosperity and environmental sustainability. No other sector offers the region a greater prospect for development.

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